Splunk surges 14% after the software company announces a $1 billion investment from Silver Lake

Doug Merritt Splunk
Doug Merritt, the CEO of , tells Insider about partnering with Microsoft and navigating a tough transition to cloud. Splunk
  • Splunk stock leaped 14% after the company announced a $1 billion investment from Silver Lake.
  • The cash infusion will be plowed back into the business and used to fund a $1 billion share buyback.
  • Splunk has been undergoing a long-term pivot from software license sales to recurring revenue cloud services.
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Shares of analytics company Splunk leaped as much as 14% Tuesday after the company announced a $1 billion investment from Silver Lake, a tech-focused private equity firm.

The cash infusion, funded through convertible debt that can be swapped for equity, will be plowed back into the business and used to fund a $1 billion share buyback program, Splunk said in a statement. Under the deal, Silver Lake chairman and managing partner Kenneth Hao will join Splunk’s board.

“It has become increasingly clear that a cloud-driven transformation is critical to modernization and Splunk is ideally positioned to help organizations throughout the world manage the complexity associated with this transition,” said Hao.

Splunk has been undergoing a long-term pivot from software license sales to recurring revenue cloud services, entering a market as competitive as it is profitable. In the first quarter of 2021, 39% of Splunk’s revenue came from the cloud, versus 26% in Q1 last year.

The company has never turned a profit, and is banking on fast growth to attract capital and offset its losses. The $1 billion investment from Silver Lake is a vote of confidence in Splunk’s ability to manage its growth.

Splunk’s shares peaked at $143 during the trading day. The stock was trading at $137 per share, up 9.17% as of 1:40 p.m. ET.